Corporate International Diversification Research Articles

기업의 국제다각화 전략이 자기자본비용에 미치는 영향－기업지배구조의 영향을 중심으로－

기업의 국제다각화 전략이 자기자본비용에 미치는 영향－기업지배구조의 영향을 중심으로－

Corporate Governance, International Diversification and Organizational Performance: A Study on Malaysian Property Industry

Currently, the housing sector is one of the Malaysian government’s main concerns as it is continuously facing various problems. This sector is endlessly struggling with enormous difficulties that have caused negative implications to the industry’s performance. Since a well governed corporate governance is said to be associated with better company performance, a number of corporate governance mechanisms are being employed in this study so as to test on their impact on the firms’ performance. Independence of board of directors (BOD) and audit committee (AC) members, non-duality and frequency of board meetings held per annum are among the CG mechanisms tested in relation to the firms’ performance, Tobin’s Q. The three-year period (2013-2015) data is taken from the annual reports and Thomson Reuters Data stream for all the companies in the property industry in Bursa Malaysia. Number of board meetings, CEO/Chairman non-duality, Independence of BOD members. These empirical evidences from this study would enhance the importance of incorporating corporate governance mechanisms and international diversification in relation to organizational performance for property industry.

Corporate Diversification, Managerial Expansion, Firm Liquidity and Operating Performance: The Role of Segment Disclosure

We investigate the association between corporate international diversification and operating and market performance and firm spread (liquidity). We find, as expected, that foreign fixed assets of US firms are significantly and positively related to firm performance as measured by operating income, cash from operations, and liquidity. This evidence suggests that corporate international diversification reflects a unique dimension that is incremental to operating and market performance. Foreign fixed assets also are significantly and positively related to prices and returns, suggesting that foreign investments are wealth changing corporate decision. This finding not only complements our operating performance results and price regressions findings, but also suggests that a portion of US firms’ investment abroad is timely. Our inferences are robust to change specifications and controlling for previously identified determinants of spread, operating and market performance. Our price and return results suggest that investors incorporate geographic segmental assets data in their valuation model. Extending the analysis on partition sample — high versus low leverage firms, we document that both foreign assets of high and low leverage firms are significantly positively associated with share price and the coefficient on high leverage firms is significantly larger than the coefficient on low leverage firms.

Does Corporate International Diversification Destroy Value? Evidence from Cross-Border Mergers and Acquisitions

This paper investigates the valuation effects of corporate international diversification by examining cross-border mergers and acquisitions of U.S. acquirers over the period 1990-1999. We find that, on average, acquisitions of fairly valued foreign business units do not lead to value discounts. Consistent with the industrial diversification discount literature, unrelated cross-border acquisitions result in a significant diversification discount of about 24 percent after accounting for the valuation of foreign targets. Furthermore, significant wealth gains accrue to foreign target shareholders regardless of the type of acquisition. Overall, our results suggest that international diversification does not destroy value while industrial diversification leads to discounts even after controlling for the pre-acquisition value of the target.

The Effect of Corporate International Diversification on Cost Stickiness

The Effect of Corporate International Diversification on Cost Stickiness

The Impact of Stakeholder Management on Corporate International Diversification

AbstractThis article explores the relationship between stakeholder management and international diversification. We differentiate between strengths and concerns in stakeholder management to demonstrate the differential effects of the two aspects of stakeholder management. Previous research on stakeholder theory often focuses on the importance of stakeholder relations, trying to build a business case of relational capital that results from strong stakeholder management. Such a relational approach, however, overlooks the process of managing stakeholders, a process that allows firms with strengths in stakeholder management to develop an important capability of managing tensions. In this study, we argue that this capability, an inherent part of stakeholder management, can be critical when firms face increased complexity during the process of international diversification. We therefore propose that strengths in stakeholder management are positively related to international diversification, while concerns in stakeholder management are negatively related to international diversification. Using panel data for 169 US multinational firms over a 10‐year period, we find support that strengths in stakeholder management facilitate international diversification. We discuss the contributions of our findings to stakeholder theory and international business research.

Should you globally diversify or let the globally diversified firm do it for you?

Abstract This paper examines whether investor-made international diversification outperforms corporate international diversification. Our results indicate that internationally diversified firms yield higher returns relative to investor-made internationally diversified portfolios. Our results partially offer an explanation for the ‘home bias puzzle’, which argues that international asset holdings in individual portfolios remain significantly lower than forecasted by analysts despite the integration of global capital markets. However, as firms increase the number of geographic segments, the excess returns are lower. Additionally, firms that belong to durables, energy, manufacturing, shops and telecommunication industries have higher excess returns relative to other industries. Overall, our results suggest that investors will earn higher returns by investing in globally diversified MNCs rather than by attempting to build mimicking internationally diversified portfolios.

An empirical assessment of the effect of corporate international diversification on firm debt and value

We investigate whether firm's foreign assets and foreign sales are associated with its leverage and excess firm value. Our analysis, of a sample of 200 firms and 1,037 firm year-observations during the time period of 1998 to 2008, indicates a positive and significant relationship between long-term debt and foreign assets. Our findings also show that long-term debt is negatively related to foreign sales. These findings indicate that international involvement can significantly affect the size of debt in a firm's capital structure. Changes in firm value are positively related to international diversification, indicating that significant gains accrue for shareholders of internationally diversified firms. These results suggest that the mode of a firm's entry into foreign markets has different market implications for shareholders and debt-holders. We also find that significant wealth gains accrue to shareholders of diversified firms with high or medium size debt structure, when taking into consideration of foreign diversification. These results have important implications on how firms design, operate and manage their loan portfolio. Our results are robust regarding the firm's debt and valuation characteristics, and suggest that foreign operations do not destroy firm value.

Corporate international diversification and risk

This study analyzes the effects of corporate international diversification (CID) on risk. Results document a mostly positive relation between CID, as measured by four different empirical proxy variables, and equity risk. I also find that diversification increases the volatility of cash flows and earnings. There is no empirical support of a reduction in correlations between firm-level and domestic market-level cash flows of internationally diversified firms. Finally, this study shows that the risk-increasing effects of CID are stronger for firms that are in more advanced stages of the internationalization process. The latter finding would be consistent with firms expanding to more risky countries in their latter stages of CID.

Corporate International Diversification and Corporate Social Responsibility: Evidence from Korean Firms

In the process of their market globalization efforts in Korea, they have been positively utilizing corporateinternational diversification strategies to increase sales in overseas markets or reduce risks based on businessdiversification strategies. However there is mixed empirical results have been made on whether the corporateinternational diversification strategy made a positive or negative impact to the firm value. Extending Priorliteratures, this study investigates the impacts of the level of corporate international diversification of Koreanfirms onto that of their corporate social responsibility activities.Empirical result suggest that there is negative (-) association between the level of corporate internationaldiversification and corporate social responsibility activities. In particular, this study is meaningful indemonstrating an empirical result that, even if the Korean firms pushed forward corporate internationaldiversification strategies actively due to the stagnant domestic market in the 2000s, they actually reducedcorporate social responsibility activities more greatly as they were recognized as the short-term expenses.

Does corporate internationalization contribute to companies’ operational efficiency? Evidence form Russian companies

Authors: Dmitry Y. Shcherbakov
 Corporate international diversification has become a widely used growth strategy. However, the majority of scientific researches insist on its value-destroying pattern. As most of these researches are focused on companies from the developed countries the experience of companies from developing countries remains fairly unexplored.The current paper proposes an estimation of internalization-performance relationship from operational efficiency prospect. The proposed model has been empirically tested on a sample of large Russian companies. The results identify a non-linear U-shape relationship between a degree of internationalization and companies’ return on capital employed. Overall for the majority of companies international diversification refers to diminish in operational efficiency.

Does Corporate International Diversification Contributes to Economic Profit? Evidence Form Russian Companies

Does Corporate International Diversification Contributes to Economic Profit? Evidence Form Russian Companies

The Interaction Effects of Internal Corporate Governance and International Diversification on Firm Performance

The Interaction Effects of Internal Corporate Governance and International Diversification on Firm Performance

Assessing the Effect of Corporate International Diversification on Shareholder-Bondholder Value

This study investigates whether international diversification, measured as foreign assets and foreign sales increase shareholder value while decreasing bondholder value (i.e., whether there is a diversification discount). Events such as foreign expansion may indeed increase shareholder value while decreasing bondholder value (hypothesis). The study also considers the extent to which debt-size in a firm’s capital structure plays a role in valuation of foreign assets and foreign sales. Using foreign assets and foreign sales data, the study reports three important results. First, shareholder value is positively related to foreign involvement, casting doubt on global discount, consistent with evidence in Santos et al. (2003), suggesting that significant wealth gains accrue to shareholders of international diversified firms. Second, bondholder value is inversely associated with foreign sales whereas foreign assets are positively related to bondholder value, implying that foreign operations are in part externally financed. Furthermore, high-leverage, medium-leverage and relatively low-leverage firms are positively associated with shareholder value, with medium-size debt enjoying greater capitalization. Overall, the results confirm that increased foreign expansion appears to increase shareholder value, consistent with the multinational network framework predicting a positive influence on value.

Corporate Internationalization and Systematic Risk

This study aims at characterizing the benefits of corporate international diversification on stock values by introducing the notion of psychic distance in the analysis. In order to capture this crucial dimension, we construct a new internationalization index, which outperforms the traditional measures, such as the foreign sales ratio, for homogenous populations of multinational companies. A Hybrid Capital Asset Pricing Model is employed to engage in measuring the relationship between international index and systematic risk by using the sample of top 100 companies listed in Taiwan Stock Exchange during 2000-2005. The results show that the sample companies generally reduce their international exposure by taking into account psychically distant markets. Alternatively, it also demonstrates that the international systematic risk exposure is often dominated by the domestic market risk exposure.

Does corporate international diversification destroy value? Evidence from cross-border mergers and acquisitions

This paper investigates the valuation effects of corporate international diversification by examining cross-border mergers and acquisitions of US acquirers over the period 1990–2000. We find that, on average, acquisitions of “fairly valued” foreign business units do not lead to value discounts. In contrast, unrelated cross-border acquisitions result in a significant diversification discount of about 24% after accounting for the valuation of foreign targets. Furthermore, significant wealth gains accrue to foreign target shareholders regardless of the type of acquisition. Overall, our results suggest that international diversification does not destroy value while industrial diversification leads to discounts even after controlling for the pre-acquisition value of the target.

Market's Response to Geographic Segment Disclosure: Evidence from Corporate International Diversification

Statement of Financial Accounting Standard No. 131 issued in 1997, regulates the reporting of geographic segment information by U.S. firms SFAS. 131: Reporting Disaggregated Information about a Business Enterprise and Related Information supersedes previous segment-reporting rules of SFAS No.14 (FASB 1976). SFAS No. 131 requires firms to disclose segment data in their annual reports for each material category of foreign involvement. Through these provisions SFAS 131 increased the scope for geographic segment information. We examine the value relevance of SFAS 131 by testing investors' responses to asset components disclosed under SFAS 131 and the explanatory power of foreign and U.S. assets. First, we find, as predicted that both foreign and domestic assets of U.S. multinationals are significantly positively correlated with changes in market value of common equity, even after we control for other identified determinants of share price. Second, we find that foreign assets, equity book value and U.S. assets explanatory power vary predictably across different specifications. The observed changes in share price sensitivity are consistent with SFAS No. 131 disclosures providing useful information to investors. Overall, our results suggest investors' greater recognition and processing of asset components after the change in geographic segment reporting.

Corporate international diversification and the cost of equity: European evidence

This paper analyzes the impact of corporate international diversification (CID) on domestic and world betas through the notion of psychic distance between countries. Using a large European sample of 598 firms, our findings indicate that this dimension significantly influences corporate risk exposure. By isolating three additive components of the Foreign Sales Ratio (FSR), we obtain the most significant results by geographically partitioning the sample, provided that firms are further classified by sector. Our framework sheds new light on how the CID of firms belonging to Sweden and the United Kingdom, as well as the Consumer Cyclical, Consumer Non-Cyclical and Information Technology sectors, sometimes can reduce and sometimes increase firm betas.

Firm Internationalization and Systematic Risk: A Multidimensional Approach

This paper analyzes the impact of corporate international diversification (CID) on domestic and world betas through the notion of psychic distance between countries. Using a large European sample of 598 firms, our findings indicate that this dimension significantly influences corporate risk exposure. By isolating three additive components of the Foreign Sales Ratio (FSR), we obtain the most significant results by geographically partitioning the sample, provided that firms are further classified by sector. Our framework sheds new light on how the CID of firms belonging to Sweden and the United Kingdom, as well as the Consumer Cyclical, Consumer Non-Cyclical and Information Technology sectors, sometimes can reduce and sometimes increase firm betas.

The Relationship Between Corporate International Diversification and Firm Value: An Empirical Inquiry

The increasing relevance of foreign operations has led to accounting regulation decisions, which in turn, provide significant changes in MNCs accounting and reporting practices. Specifically, FASB (1997) issued Statement of Financial Accounting Standards (SFAS) No. 131 to increase the profile of geographic segment disclosure. This study provides evidence on whether international diversification, as measured by foreign assets of U.S. firms is associated with market value of common equity. The paper finds evidence of market valuation of foreign assets that is consistent with theoretical expectations and robust to different approaches and specifications. Consistent with Errunza and Senbet (1984), I find that international diversification is significantly correlated with firm value, suggesting that firms that internationalize are rewarded with high equity value. The multivariate tests indicate the average annual value of a firm with foreign operations is 2.6% higher than firms without foreign assets. In firm-size comparison, I report that large firms experience significantly greater price responses than small firms. This finding is consistent with differential risk hypothesis in Easton and Zmijewski (1989) and Collins and Kothari (1989) but inconsistent with differential information hypothesis of Atiase (1985). In a comparison of U.S. domestic and foreign assets, the analysis indicates that investors' valuation of assets depends on the operating environment in which the firm is operating. That is, there is cross-sectional valuation differences arising from the market assessment of the probability of recovery of assets located in different jurisdictions.